Buying a Dental Practice: A Complete Guide to Successful Acquisition

Has it always been your dream to own a dental office? Buying a dental practice that already exists might be your best option.

The U.S. has over 180,000 dental practices, and at least a small percentage of them change hands every year. Explore buying one from a selling dentist in your area rather than building from the ground up.

Purchasing a practice could be an excellent long-term investment. It can also fulfill your professional aspirations by giving you increased control over your dental career for a more reasonable upfront investment than starting from scratch.

Check out our guide to completing a successful dental practice acquisition.

Why Buy a Dental Practice?

As a dentist, you don’t have to go through with buying a dental practice to enjoy success. According to the American Dental Association, about 73% of dentists own practices as of 2023 — but this number is down from 20 years ago when it was almost 85%.

Some dentists choose to work for practices owned by other dentists. Others work for hospitals, community health centers, academic institutions, dental schools, and more.

You’re welcome to join these dentists if you would like. However, owning a dental practice comes with benefits you won’t get elsewhere.

Advantages of Ownership

Purchasing an existing practice comes with the following benefits:

• You’ll have the autonomy to run a practice the way you want.
• You’ll have the chance to increase your income (especially if you buy a practice with positive cash flow!).
• You’ll have the opportunity to build up equity in a practice.

Practice ownership is also often a big source of pride for many experienced professionals.

Understanding the Market Demand

You could argue the demand for dental services in the U.S. has never been higher. There are several reasons for this, including:

• The country’s aging population
• The increasing number of dental care health professional shortage areas (HPSAs)
• America’s improved understanding of preventive dentistry
• The popularity of cosmetic dentistry
• The availability of the latest dental trends

This makes now the perfect time to purchase a dental practice. By finding and acquiring the ideal practice, you can generate an impressive income for years to come.

Key Considerations Before Buying a Dental Practice

Purchasing a dental practice could be one of the best investments you ever make. Still, it requires careful consideration.

Assessing Your Readiness

Are you prepared to purchase a dental practice and take responsibility for running it? Consider your financial and professional readiness first.

Financial Readiness

The average dental practice is worth about 70 to 75% of its gross revenue. If, for example, a practice brings in $1 million in gross revenue annually, its value will typically fall between $700,000 and $750,000.

For this reason, you must have your personal finances in good order to buy a practice. You’ll also need to have a credit score that is high enough to qualify for dental practice loans.

Crunch the numbers to make sure you can afford to pay for a dental practice.

Professional Readiness

Purchasing a dental practice might sound like a great idea, but are you sure you’re up for the challenge? As a practice owner, you’ll need to:

• Put together a talented team of dental professionals
• Manage your employees and deal with staffing issues
• Keep your dental office updated with the latest equipment and training

You’ll also need to do all this while performing your regular duties as a dentist. Before buying a dental office, consider your clinical experience and practice management skills.

Evaluating Practice Types

Another thing to think about before buying a dental practice is which type of practice to purchase. Failing to pick the right practice could doom it from the start.

Types of Dental Practices

The main types of dental practices include:

• Solo practices: Owned by one dentist who oversees the entire operation
• Group practices: Owned by several dentists who work together to manage an office
• Specialty practices: Owned by one or more dental specialists who provide services like oral medicine, orthodontics, and pediatric dentistry

Location and Demographics

Do you want to set up shop in a large city filled with potential patients? Or would you prefer to operate out of one of the aforementioned HPSAs?

Either way, select a practice location that aligns closely with your personal and professional vision.

Steps to Purchasing an Existing Dental Practice

Work through the right steps when investing in a dental practice to set it up for a successful transition.

Conducting Due Diligence

Conducting thorough due diligence is one key to deciding whether or not to purchase a dental practice. Here is how the due diligence process should play out.

Reviewing Financials

Begin by poking through a dental practice’s financial records. See whether it’s in good financial health by analyzing its:

• Profit and loss statements
• Tax returns
• Accounts receivable

Operational Assessments

Due diligence involves more than just sifting through a practice’s financial statements. In addition to evaluating its financial performance, you should assess its operations. Do this by looking at its:

• Current staff members
• Existing patient base
• Dental equipment and supplies
• Operational procedures

Valuation of the Practice

Those selling dental practices obviously want to make as much as they can when listing them. This may lead to dental practice owners asking for more than their dental offices are worth when they put up their “For Sale” signs. Find out the true value of a practice before buying it to avoid getting taken advantage of.

Understanding Valuation Methods

Here are the most common valuation approaches you can take when putting a price tag on a dental practice:

• Income-based valuation: Divide a practice’s average net income by its capitalization rate
• Market-based valuation: Look at the values of other practices in the local real estate market and compare them
• Asset-based valuation: Calculate the value of a practice’s assets and subtract its liabilities

Engaging a Professional Appraiser

Seeking professional advice from a dental practice broker or appraiser is another way to get a valuation for an existing office. They can consider each of the factors we just mentioned and examine the ins and outs of a dental practice more closely to provide a more accurate valuation.

Financing Your Purchase

Buying a dental practice will cost hundreds of thousands and sometimes even millions of dollars. This may force you to secure financing, and you’ll need to know which options exist.

Loan Options and Financing Tips

Many loan options are available for those purchasing practices. They include:

• Bank loans
• Small business administration (SBA) loans
• Private lender loans

Shop around for dental practice loans and look for the ones with the best available terms and conditions.

Preparing a Business Plan

Establishing a business plan for your new practice could make or break your ability to qualify for financing. Create a well-prepared business plan that includes these components:

• Company mission statement
• Dental practice philosophy
• Financial projections
• Growth strategies
• Marketing ideas

Conduct market research to guarantee you get everything related to starting a dental practice in your area into your business plan. This thorough research can improve your odds of being approved for funding.

Legal and Regulatory Considerations

The legal and regulatory aspects of buying a dental office are often the least fun parts of purchasing one for dentists. But they’re also some of the most important steps you must take as you inch closer to completing a dental practice acquisition.

Legal Steps in Practice Acquisition

Here are a couple of the essential legal steps associated with dental practice acquisition.

Contracts and Agreements

You’ll sign many contracts and agreements while purchasing the perfect practice. These include:

• Practice purchase agreement
• Non-compete clause
• Lease agreement

Familiarize yourself with these contracts and agreements in advance so that you fully understand what you are signing.

Engaging Legal Counsel

Hiring a lawyer to help with any real estate purchase is imperative. Having an experienced dental-specific attorney in your corner is especially important to ensure you don’t skip any critical steps when signing a purchase agreement to buy a dental practice.

Your attorney can review legal documents and contracts related to dental practice sales.

Compliance and Licensing

Here are just some of the regulatory considerations to remember during dental practice acquisitions.

State Licensing Requirements

Every state has different licensing requirements for those finishing dental practice acquisitions. Generally speaking, you must have:

• A Doctor of Dental Surgery (DDS) or Doctor of Dental Medicine (DMD) degree
• Passing grades on the Integrated National Board Dental Examination (INBDE) and state-specific exams
• A good standing with the dental board in your state

To get started, you’ll likely need a business license, an employer identification number (EIN), and business insurance.

Regulatory Compliance

The Occupational Safety and Health Administration (OSHA) has established standards for dental offices that you must comply with when starting your own. You’ll also need to adhere to the standards in the Health Insurance Portability and Accountability Act (HIPAA).

Transitioning and Managing Your New Practice

Want to make a smooth transition from buying a dental practice to managing it? Take the right approach to the last portion of the practice acquisition process.

Creating a Transition Plan

Putting a dental practice transition plan in place can create a solid structure for your new operation.

Staff Retention and Training

Dental staffing shortages have rocked the industry in recent years. To avoid this problem, it’s quite common for dentists to retain as many employees as possible during practice transitions.

Provide these employees with the proper training on the new systems you’ll use to replace existing systems. These dental staffing solutions and strategies should help.

Patient Communication

Keeping a dental practice’s existing patient base informed is the key to your early success. Let existing patients know about the transition while committing to providing them with top-notch patient care throughout it. Advise them of any changes to the insurance coverage your office will also accept.

Integrating Technology and Systems

Introducing new technologies and systems will put your new dental practice on the cutting edge from the beginning. They can show your employees and patients that you’re taking your commitment to improving operations seriously.

Modernizing Operations

Weave offers an advanced dental office communication system that can streamline communications, billing, and patient management during dental practice transitions. It can improve patient flow throughout the transition process.

Enhancing Patient Experience

Weave can also provide your practice with an appointment booking system, reminders, and digital forms. They’ll improve patient satisfaction and operational efficiency.

Let Weave Lend a Hand With Dental Practice Transitions

Buying a dental practice is a big decision you won’t regret if you do it correctly. Make the right considerations and take the proper steps to give your new practice every opportunity to succeed.

Take advantage of Weave’s integrated solutions to simplify and enhance your new practice. Weave’s tools can create seamless dental practice transitions.

Ready to make your dental practice acquisition a success? Get a demo of Weave’s solutions today!

Frequently Asked Questions (FAQs)